On July 26, 2016, Alberta adopted a new exemption from its
general requirement for issuers to clear and file a prospectus
prior to issuing securities. The new exemption is found in ASC Rule
45-517 (the "Start-up Business Exemption").
The Start-up Business Exemption is available for distributions
of securities by Alberta issuers seeking to raise funds from
Alberta investors. It can be used by issuers that wish to raise
funds in a traditional manner, for example, through their contacts
in the community or through a traditional registered dealer. It can
also be used by issuers to crowdfund and raise funds via an online
funding portal that is registered as a dealer.
The key conditions of the Start-up Business Exemption are as
The issuer must be an "eligible
issuer" i.e., the head office of the issuer must be located in
Alberta or a corresponding jurisdiction.
The issuer can only distribute
"eligible securities" i.e., the securities must be either
common shares, non-convertible preference shares, securities
convertible into common shares or non-convertible preference
shares, non-convertible debt securities linked to a fixed or
floating interest rate, limited partnership units or investment
shares that are non-convertible preference shares issued by a
cooperative under the Cooperatives Act (Alberta).
The issuer must prepare an offering
document in the required form, which includes certain information
about its business, its management and the offering, including how
it intends to use the funds raised, and the minimum offering
The issuer, including other members
of its "issuer group", cannot raise in aggregate more
than $250,000 per distribution. The issuer group is also limited to
two start-up business distributions in a calendar year.
The aggregate lifetime amount that an
issuer group can raise under all start-up business distributions is
Generally, the maximum amount that an
issuer can accept as a subscription from an investor in a start-up
business distribution is $1,500. However, if a registered dealer
provides the investor advice that the investment is suitable to the
investor, the maximum subscription from that investor is
The offering must close within 90
If the distribution is made through a
funding portal the portal must be a registered dealer.
The issuer must provide purchasers
with a 48 hour period in which to cancel their agreement to
The issuer must provide each investor
with a specified form clearly explaining certain risks of investing
and must obtain an acknowledgment from each investor that they have
read and understood the contents of that form.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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